EU businesses want to see Britain punished for Brexit

Separately, the European Central Bank (ECB) said banks must submit “complete and high quality” licence applications for euro zone hubs by the end of this month to ensure there is no disruption in business with EU customers after Brexit Day.

The prime minister should also reserve the right to “take with it the £39bn it has offered to pay as part of a divorce settlement”, it says.

“Accordingly, we believe now is the time to issue instructions to United Kingdom authorities to accelerate their preparations for “no deal” and a move to a World Trade Deal under WTO rules that, after all, govern the vast majority of global trading arrangements today”.

“The best option is leaving with a good deal but you’ve got to be able to walk away from the table”, he said.

“The point I make to them is that they should also be making the same case to European governments that that will be bad for them”.

Two years after the country voted 52 to 48% to leave the world’s biggest trading bloc, polls show political divisions over Brexit are entrenched and, despite some confusion over what Brexit will mean, there has been no clear change of heart.

“Across the country I find people who – whatever they voted two years ago – just want us to get on and do it”, he said.

“The big problem the European Union has is that we don’t know what the United Kingdom wants and it takes two in any negotiation to reach an agreement”.

The UK is yet to define exactly what it wants in its future relationship with the EU.

If the United Kingdom had to trade under WTO rules, tariffs – a tax on traded goods – would be applied to all United Kingdom exports.

Gauging the economic impacts of a single policy is very hard, because it’s impossible to perform a truly scientific experiment on complex, real-world systems.

The prospect of a no-deal scenario has sent shudders through the business world: Airbus, the aerospace giant, warned on Thursday that the company could quit the United Kingdom unless the government made the right decisions on Brexit.

More prominent manufacturing firms are set to issue warnings about Brexit negotiations within days, after Airbus SE and BMW AG broke cover to say that they would reconsider their United Kingdom investment plans unless a Brexit deal was reached keeping Britain closely aligned with Europe.

BMW’s United Kingdom boss Ian Robertson told the BBC the company would have to start making contingency plans if it did not get clarity in the next couple of months, warning the lack of a deal risked “making the United Kingdom less competitive than it is, in a very competitive world right now”.

Britain is on course to end its membership of the European Union next March, having first joined in 1973, but trading will continue for a limited period after that under a transitional period arrangement between the two sides. “Not only will there be higher costs for trading with the United Kingdom, but also additional administrative burdens that need to be handled”.

“Everything I see and hear from the British media indicates they will not be in a position to bring forward proposals that will strike a deal, and they need to do so sooner rather than later because time is getting short and patience is wearing out”, he told reporters at a briefing last week.